The easiest way to get free stuff in Denver right now is to lease a new apartment.
“In the Denver market, we are certainly offering concessions, and I would expect most landlords are,” said Frank Campise, a Chicago developer who owns about 15 apartment buildings throughout the metro area.
Apartment landlords facing the financial fallout from too much supply
The region’s multifamily market has softened amid a historic increase in supply at the same time that demand has softened because of declining job growth. According to the Apartment Association of Metro Denver, the vacancy rate for Denver itself is 7%, with an average rent of $1,849 a month. That’s the lowest rent since the start of 2022.
The picture is slightly rosier for the broader seven-county metro area, where the vacancy rate is 6.4%, according to the association.
A certain period of free rent is the most common concession. Campise said that, to keep buildings full, lots of landlords are offering one to two months free.
“In 2023, I think that’s when the market started to implode,” he said. “We would have not had any concessions in ’23. Not only would we have not had any concessions, but the top-line rent would have been 15% higher.”
And two months isn’t the ceiling. Both The Alder, a new building in Parker, and The Russell, in Olde Town Arvada, are offering up to 10 weeks free on leases with 12-month terms or longer, according to their websites.
Bill James and Eric Karnes, meanwhile, track Denver’s apartment pipeline for local research firm JRES Intelica CRE. Their data shows about 17,000 new units completed in the third quarter across the entire metro area. In comparison, only 5,000 units have started construction through the first three quarters of the year.
“We get into a recession, and all these new projects keep coming. … Boy, that vacancy rate could shoot up over 10%,” Karnes said.
The pair noted that landlords are also tacking on extra goodies. The Adler offers a $750 gift card if a tenant leases within 48 hours of touring the apartment. And at The Russell, move in by the end of November and you get a free Epic or Ikon ski pass.
“And you can tell the lender – ‘It’s marketing!’” Karnes said.
Sky-high concessions are most commonly found in new buildings still in lease-up. The owners often have a construction loan with a deadline and are in a race to get units filled before refinancing. They claim concession losses as a marketing expense, which allows their books to show they are paid full-price rent, even if the effective rent that a tenant is paying is less.
Managers of older apartments can take a different approach to stay competitive.
Denver-based Cornerstone Apartments manages 7,500 units, most in older buildings in central Denver, for a host of smaller landlords.
“We still have concessions throughout our portfolio, but what we’re doing is we’ve just reduced our rents drastically,” CEO Charlie Hogan said.
Hogan said he has 17 apartments going for less than $1,000 a month that would typically be between $1,100 and $1,200.
That tact kept his vacancy rate steady at 6.1%, lower than Denver’s average, but still one of the highest levels he’s had in his 20 years at Cornerstone.
Hogan points to Denver’s sluggish job growth as a major driver of the slowdown.
“You got 41% [office] vacancy rate downtown,” he said. “That’s my renter.”
